Orissa High Court
Commissioner Of Income-Tax vs Vincentian Orissa Society on 4 October, 1991
Equivalent citations: [1992]194ITR743(ORISSA)
Author: A. Pasayat
Bench: A. Pasayat
JUDGMENT A. Pasayat, J.
1. At the instance of the Revenue, the following question has been referred to this court for adjudication by the Income-tax Appellate Tribunal, Cuttack Bench (in short "the Tribunal"), under Section 256(1) of the Income-tax Act, 1961 (in short "the Act").
"Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the Commissioner of Income-tax had no jurisdiction to revise the assessment order passed by the Income-tax Officer in conformity with the directions given by the Inspecting Assistant Commissioner and thereby setting aside the order passed by the Commissioner of Income-tax under Section 263 of the Income-tax Act, 1961 ?"
2. The background facts are that the assessee was assessed for the assessment year 1973-74 for the accounting period ending on December 31, 1972, on September 18, 1979. The assessee had filed its return of income on September 20, 1973, showing that its taxable income was nil. Subsequently, the Commissioner of Income-tax, Orissa, was of the view that the order of assessment was prejudicial to the interests of the Revenue, and proceedings under Section 263 of the Act were initiated. An objection was raised before the Commissioner that the order having been passed after approval by the Inspecting Assistant Commissioner in terms of Section 144B, the same was not available to be revised by the Commissioner under Section 263 of the Act. This objection was not accepted by the Commissioner who set aside the order of assessment and directed the Income-tax Officer concerned to redo the assessment. The assessee assailed the order of the Commissioner before the Tribunal. The sole challenge before the Tribunal was that the Commissioner had no jurisdiction to set aside an order passed by the Income-tax Officer where the order was passed after, approval of the draft order of assessment by the Inspecting Assistant Commissioner. It was contended that the order ceased to be one passed by the Income-tax Officer and, therefore, the Commissioner lacked competence and jurisdiction to revise the same under Section 263. The Tribunal accepted that contention and held that the Commissioner had no jurisdiction to set aside an order passed by the Income-tax Officer where the same was passed after approval by the Inspecting Assistant Commissioner. On being moved under Section 256(1) of the Act, the aforesaid question has been referred to this court for adjudication.
3. It is the stand of the Revenue that the order which was revised by the Commissioner is that of the Income-tax Officer and merely because prior to the passing of the order, the approval of the Inspecting Assistant Commissioner was obtained, it had not ceased to be an order of the Income-tax Officer and, therefore, the Commissioner had the jurisdiction to set it aside under Section 263. Learned counsel for the assessee, however, submits that, in essence, the order was passed by the Inspecting Assistant Commissioner and, therefore, the Commissioner had no jurisdiction to deal with the matter.
4. Section 263(1), as it stood at the relevant time, empowered the Commissioner to call for and examine the records of any proceeding under the Act and pass such order if he considered that the order passed therein by the Income-tax Officer was erroneous in so far as it was prejudicial to the interests of the Revenue. The order was obligated to be passed after giving the assessee a reasonable opportunity of being heard, and after making or causing such enquiry as deemed necessary. Section 263(1) referred to records of any proceeding under the Act and the order passed therein by the Income-tax Officer. Undisputedly, the proceeding in the case at hand referred to assessment proceedings. The same was before the Income-tax Officer. The order was passed by the Income-tax Officer in the said proceeding. Merely because a reference was made to the Inspecting Assistant Commissioner in compliance with a statutory mandate, the proceeding did not cease to be one before the Income-tax Officer and the order passed by the Income-tax Officer did not lose its statutory content. Explanation to Section 263(1) was introduced by the Taxation Laws (Amendment) Act, 1984, with effect from October 1, 1984, for removal of doubts. It has been specifically provided that an order of assessment passed by the Income-tax Officer included an order of assessment made on the basis of directions issued by the Inspecting Assistant Commissioner under Section 144B of the Act. From this, it is not inferable as contended by the assessee that, prior to October 1, 1984, the order made on the basis of the direction of the Inspecting Assistant Commissioner was not available to be interfered with under Section 263. There have been further amendments in the Explanation to Section 263(1) by the Finance Act, 1988. We are not concerned with those amendments. Subsequently, Section 144B has been omitted with effect from April 1, 1989, by the Direct Tax Laws (Amendment) Act, 1987.
5. The Explanation to Section 263(1) was added with effect from October 1, 1984, "for the removal of doubts". It was not inserted to provide anything new. It is clarificatory in nature. It did not confer or create a new jurisdiction. Its purpose was to remove a doubt about jurisdiction which existed. The scope of an Explanation to the main provision is very much limited and, at any rate, it does not take the place of substantive law.
6. The Explanation is to be read as intending to harmonise with and clear up any ambiguity in the main section. An Explanation to the section is inserted only by way of abundant caution. (See Abdul Latif Khan v. Mt. Boadi Begum, AIR 1934 PC 188). An explanation added to a statutory provision is not a substantive provision in any sense of the term, but, as the plain meaning of the word itself shows, it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. (See S. Sundaram Pillai v. V.R. Pattabiraman, AIR 1985 SC 582). In this context, a reference to Section 246 of the Act as it stood at the relevant time is necessary. The same deals with the provision relating to appeals. Even though the draft was approved by the Inspecting Assistant Commissioner, an appeal lay before the Appellate Assistant Commissioner of Income-tax. Before insertion of Sub-section (2) in the said section by the Finance (No. 2) Act, 1977, even in cases of assessments made on the basis of directions issued by the Inspecting Assistant Commissioner under Section 144B, an appeal lay before the Appellate Assistant Commissioner. The newly inserted provision, inter alia, created a new appellate authority, namely, Commissioner of Income-tax (Appeals). Sub-section (2)(f) provided that an appeal lay to the newly created appellate authority where the order of assessment was made on the basis of the directions issued by the Inspecting Assistant Commissioner under Section 144B. Therefore, the Tribunal was not justified in concluding that the order, having been approved by the Inspecting Assistant Commissioner, ceased to be that of the Income-tax Officer, and consequently was not justified in its conclusion that the Commissioner lacked jurisdiction to deal with the order under Section 263 of the Act.
7. The reference is, accordingly, answered in favour of the Revenue and against the assessee. No costs.
S.K. Mohanty, J.
8. I agree.